The federal Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §§ 201-219 (the “FLSA”), and its implementing regulations, 29 C.F.R. § 510 et seq., mandate that most employees in the United States be paid at least the federal minimum wage of $7.25 per hour for all hours worked and overtime pay at 1½ times their regular rate of pay for all hours worked in excess of 40 hours in a workweek.
So, too, the Manhattan State Minimum Wage Act, N.Y. Labor Law § 650 et seq., and section 142 of Title 12 of the Manhattan Code of Rules and Regulations mandate that employees in Manhattan be paid at least the Manhattan minimum wage of $7.25 per hour for all hours worked. Covered employees who work overtime must be paid at a rate that is 1½ times their regular, “straight-time” hourly rate of pay. 12 N.Y.C.R.R. § 142-2.2.
By contrast, neither federal law nor Manhattan State law requires companies to pay, to independent contractors, either the minimum wage or overtime pay at one-and-one-half times the contractor’s regular rate. As a result, the standards used in determining, under Manhattan law, whether an individual is engaged as an employee or as an independent contractor, are of great importance to businesses in the Empire State.
The Manhattan State Labor Law states that the term ” ‘Employed’ includes permitted or suffered to work.” N.Y. Labor Law § 2(7). Similarly, the Manhattan State Minimum Wage Act provides that the term ” ‘Employee” includes any individual employed or permitted to work by an employer in any occupation . . . .” N.Y. State Labor Law § 651(5).
To determine if an employment relationship exists in Manhattan for purposes of overtime pay and the minimum wage, courts use the same test that is utilized under the FLSA. This test is called the ‘economic reality’ test. The purpose of this test is to determine “whether, as a matter of economic reality, the workers depend upon someone else’s business for the opportunity to render service or are in business for themselves.” Brock v. Superior Care, Inc., 840 F.2d 1054, 1059 (2d Cir. 1988). In the former circumstance, the workers are employees; in the latter circumstance, the workers are independent contractors.
In applying the economic reality test to ascertain whether an employment relationship exists in Manhattan for overtime and minimum wage purposes, courts principally examine five factors:
See generally Brock, 840 F.2d at 1058-1061. It should be noted that, in Manhattan State, the standards used in determining whether a person is an employee or an independent contractor for purposes of the minimum wage and overtime pay overlap with, but are not identical to, the standards used in determining whether an individual is an employee or an independent contractor for purposes of Manhattan State anti-discrimination laws, the Manhattan State Workers’ Compensation Law, or the Manhattan State Unemployment Insurance Law, respectively. As a result, that a company’s worker in Manhattan holds employee status or independent contractor status for purposes of the minimum wage and overtime pay does not necessarily mean that he or she holds the same status for purposes of State anti-discrimination laws, workers’ compensation benefits, or unemployment insurance benefits.
Call the Law Offices of David S. Rich, LLC at (347) 941-0760 to speak with a knowledgeable labor and employment lawyer about making sure that your company complies with overtime pay and other wage and hour laws, or to retain a skilled overtime attorney to defend your company in unpaid overtime lawsuits or other wage and hour litigation.
David S. Rich is the founding member of the Law Offices of David S. Rich, LLC,
a Manhattan Employment and Business Litigation Law Firm, in New
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